Abstract

Online branding plays an increasingly vital role for agricultural products in agriculture and e-commerce industries alike. To improve the cooperation between farmers and e-retailers, and to increase awareness of agricultural products through online branding, many governments implement series of subsidy policies. We investigate the impact of government subsidies by proposing a three-player game model (consisting of a government, a farmer, and an e-retailer) in supply chains. More specifically, we develop four Stackelberg game scenarios, including a benchmark scenario in which government provides no subsidies, two scenarios in which government subsidizes either farmer or e-retailer without subsidizing the other, and one in which both are subsidized. We find awareness of online branding for agricultural products is positively related to farmers? market sensitivity while e-retailers? cost factor shows a negative relation; optimal awareness emerges when both farmers and retailers are subsidized. In turn, farmers and retailers achieve their best profits when both are subsidized. Furthermore, farmers? profits are higher than e-retailers? in every subsidy scenario. We obtain the most effective parameters for government subsidies using ex ante and ex post strategies, extending our model by incorporating spillover effects. Most of our conclusions are consistent with intuition and propositions we began with, but it is interesting to note that farmers? best profits appear when farmers receive subsidies and e-retailers do not.

Highlights

  • Agricultural brands that represent excellent quality commitment and reduce information asymmetry between farmers and consumers, play a vital role in agricultural industries and fresh food markets all over the world

  • (1) How do different government subsidy strategies affect the awareness of agricultural products? online branding? (2) How do government subsidies affect the profits of e-retailers and farmers who are responsible for awareness of agricultural products? online branding? (3) Which subsidy strategy should government adopt? What are the best subsidy formats and parameters, considering various strategies?

  • Investigating the impact of different government subsidy strategies, we modeled a three-player Stackelberg game and characterized four different scenarios concerning subsidies in the context of ex ante strategy

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Summary

Introduction

Agricultural brands that represent excellent quality commitment and reduce information asymmetry between farmers and consumers, play a vital role in agricultural industries and fresh food markets all over the world. (2) How do government subsidies affect the profits of e-retailers and farmers who are responsible for awareness of agricultural products? By subsidizing the farmer and the e-retailer, government subsidy strategies are beneficial because they induce more consumers to embrace agricultural products. Governments offering subsidy quotas to both farmers and e-retailers effectively increase awareness of agricultural online-branded products? Online acceptance of agricultural products is better, e-retailers need to increase investments, redouble efforts, and continue cooperating with farmers to better meet consumer demand and maximize long-term benefits. For agricultural products similar to the Fengjie Navel Orange, ex ante strategy for government decision making on subsidy programs is a method for assessing and stimulating the needs of local agricultural markets [32], and it can vary by region [29].

Literature review
The model
No subsidies for either party
Government strategy analysis
Subsidies for farmer only
Subsidies for E‐retailer only
Subsidize both sides
Analysis
Government’s strategy to subsidize
Extention
Findings
Conclusion
Full Text
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